THE PRESIDENT: Good morning. 2005 has been a year of strong progress
toward a freer, more peaceful world and a more prosperous America. This
year we watched the Iraqi people defy the terrorists and suicide bombers
and hold three successful elections, voting to choose the only
constitutional, democratic government in the Arab world. We also saw the
people of Afghanistan elect a democratic parliament in a nation that
only a few years ago was ruled by the Taliban.

These are amazing achievements in the history of liberty. As freedom and
democracy take hold in a troubled region, we are making the American
people safer here at home, and laying the foundation of peace for future
generations.

The United States has a vital interest in the success of a free Iraq, so
in the year ahead, we will continue to pursue the comprehensive strategy
for victory that I have discussed with you in recent weeks. This
strategy has security, political, and economic elements. First, our
coalition is staying on the offense, finding and clearing the enemy out
of Iraqi cities, towns, and villages, transferring more control to Iraqi
units, and building up the Iraqi security forces so they can
increasingly lead the fight to secure their country. Second, we are
helping Iraqis build the political institutions of an inclusive,
unified, and lasting democracy. And third, our coalition is overcoming
earlier setbacks and moving forward with a reconstruction plan to
rebuild Iraq's economy and infrastructure. As we help Iraq build a
peaceful and stable democracy, the United States will gain an ally in
the war on terror, inspire reformers across the Middle East, and make
the American people more secure.

During 2005, thanks to our tax relief, spending restraint, and the hard
work of the American people, our economy remained the envy of the world.
Our economy has been growing strongly for more than two years, and has
added nearly 4.5 million jobs since May of 2003. More Americans own
their homes than at any time in our nation's history. Inflation is low,
productivity is high, and small businesses are flourishing. Real
disposable income is up, consumers are confident, and early reports
suggest good retail sales this holiday season.

To keep our economy moving forward, we must continue to pursue sound
policies in Washington and be wise with taxpayers' money. We made real
progress this year in restraining government spending. Last February, I
submitted to Congress the most disciplined budget proposal since Ronald
Reagan was President. Working with the Congress, we ended or reduced
about 90 lower-priority or poorly performing government programs, cut
non-security discretionary spending, and kept overall discretionary
spending growth below the rate of inflation. We have now cut the rate of
growth in non-security discretionary spending each year I have been in
office.

Before their holiday recess, both the House and the Senate also voted to
cut mandatory spending by nearly $40 billion. This will be the first
reduction of entitlement spending in nearly a decade. By being
responsible with the taxpayers' money, we are funding our nation's
priorities, while staying on track to cut the deficit in half by 2009.

In the new year, we must also make permanent the tax relief that has
kept our economy growing. We will work to expand free and fair trade, so
America's farmers, workers, and businesses can enjoy the opportunities
the global economy offers. We'll build on the progress we've made with
this year's energy bill, so our nation will be less dependent on foreign
sources of energy. We will continue to promote an ownership society in
which people have more control over their retirement and health care.
We'll continue to improve education and job training programs, so our
citizens have the skills necessary to compete and succeed in the 21st
century. And we will show the compassionate heart of our nation and
provide the people of the Gulf Coast the help they need to rebuild after
Hurricanes Katrina and Rita.

In 2005, America grew in prosperity, advanced the cause of freedom and
peace, and enhanced our security. Our duties continue in the new year,
and I'm confident that our nation will meet the challenges that lie
ahead.